Mirion Technologies, Inc. (NYSE:MIR) shareholders would be excited to see that the share price has had a great month, posting a 49% gain and recovering from prior weakness. The annual gain comes to 109% following the latest surge, making investors sit up and take notice.

Following the firm bounce in price, when almost half of the companies in the United States' Electronic industry have price-to-sales ratios (or "P/S") below 2.1x, you may consider Mirion Technologies as a stock probably not worth researching with its 3.7x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

How Has Mirion Technologies Performed Recently?

Recent times have been pleasing for Mirion Technologies as its revenue has risen in spite of the industry's average revenue going into reverse. Perhaps the market is expecting the company's future revenue growth to buck the trend of the industry, contributing to a higher P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Is There Enough Revenue Growth Forecasted For Mirion Technologies?

In order to justify its P/S ratio, Mirion Technologies would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 8.3%. The latest three year period has also seen an excellent 34% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 6.4% during the coming year according to the four analysts following the company. With the industry predicted to deliver 9.1% growth, the company is positioned for a weaker revenue result.

In light of this, it's alarming that Mirion Technologies' P/S sits above the majority of other companies. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.

What Does Mirion Technologies' P/S Mean For Investors?

Mirion Technologies shares have taken a big step in a northerly direction, but its P/S is elevated as a result. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

It comes as a surprise to see Mirion Technologies trade at such a high P/S given the revenue forecasts look less than stellar. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

Before you take the next step, you should know about the 3 warning signs for Mirion Technologies that we have uncovered.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.